Natural gas flows from Iran to Iraq have partially resumed, providing a sliver of stability amid a rapidly escalating regional energy conflict. This development comes just three days after a complete halt that threatened to plunge Iraq into darkness.
The chain of events began on March 18, when an Israeli strike hit Iran's critical South Pars gas field. This attack immediately disrupted production and severed the gas pipeline supply to Iraq, which relies on Iran for 30-40% of its electricity generation. The impact was instantaneous, not only for Iraq but for global markets as well. Brent crude oil prices quickly shot past $100 per barrel, and European natural gas futures (TTF) spiked, reflecting fears of a wider war disrupting Middle Eastern energy supplies.
The situation worsened dramatically when Iran retaliated by striking Qatar's Ras Laffan LNG hub, a major supplier to the global market. This move squeezed the availability of liquefied natural gas (LNG), making it nearly impossible for Iraq to secure alternative fuel sources on short notice. The world watched as the region tipped closer to a full-blown energy war, with critical infrastructure becoming direct targets.
So, how was even a partial resumption possible in such a tense environment? The answer lies in a combination of desperation and diplomacy. First, Iraq faced the imminent threat of a nationwide blackout, putting immense pressure on its government to secure fuel at any cost. Second, a crucial exception within the U.S. sanctions regime provided the necessary political cover. While Washington ended a waiver for Iraq to import electricity directly from Iran in March 2025, it kept a separate waiver in place allowing for the import of Iranian gas for power generation. This distinction became Iraq's lifeline.
The resumed flow of 5 million cubic meters per day is merely 10% of the typical volume but is just enough to be a 'spot stabilizer' for Iraq's grid. It prevents an immediate collapse but doesn't solve the underlying crisis. This precarious situation highlights how vital energy infrastructure can become a tool of statecraft and a point of leverage, with sanctions waivers acting as a geopolitical pressure valve.
- Glossary -
- South Pars gas field: One of the world's largest natural gas fields, located in the Persian Gulf and shared between Iran and Qatar.
- TTF (Title Transfer Facility): A virtual trading point for natural gas in the Netherlands, which serves as the primary price benchmark for the European gas market.
- Geopolitical Risk: The risk that political actions, conflicts, or instability in a country or region will have a negative impact on investments, markets, and economies.